Ethanol’s Policy Privileges: Heading for History’s Dustbin?
The lame-duck Congress has a rare opportunity to avoid $25-30 billion in new deficit spending over the next five years, ease consumers’ pain at the pump, and scale back political manipulation of energy markets by literally doing nothing.
At the stroke of midnight on December 31 of this year, the 45¢ per gallon Volumetric Ethanol Excise Tax Credit (VEETC), commonly known as the blender’s credit, and the 54¢ per gallon tariff on imported ethanol, will expire.
A bipartisan group of 17 senators, led by Sens. Dianne Feinstein (D-Calif.) and Jon Kyl (R-Ariz.), say it’s time for these special-interest giveaways to go gently into the night. A broad coalition of environmental, taxpayer, hunger, free market, and food industry organizations are urging House and Senate leaders to let the VEETC meet its statutorily appointed fate.
An exciting prospect — for the first time ever, Congress may decide to put the general welfare of consumers and taxpayers ahead of the corporate welfare of the ethanol lobby.
The outcome, of course, is far from certain. Growth Energy, a prominent ethanol lobbyist, advocates a five-year extension of the VEETC and tariff, a mandate requiring that all vehicles sold in the United States be capable of running on E-85 (motor fuel blended with 85% ethanol), taxpayer-backed federal loan guarantees to build a national ethanol pipeline network, and tax credits for the installation of 200,000 E-85 pumps at service stations.
America is not addicted to oil (consumers will stop buying gasoline the moment a superior product comes along), but the ethanol lobby is hooked on subsidies. As with any genuine addiction, ethanolism is an appetite that grows with feeding. The lobby may say it wants to make America energy independent, save the planet, and save the family farm, but what it really wants is MORE — more trade protection, more of our tax dollars, and more market-rigging rules.
Growth Energy’s ask-for-the-moon agenda has zero prospect of being enacted in the lame-duck Congress. Many compromises are possible, though, such as a one-year extension or scaling back the VEETC from 45¢ to 36¢ a gallon. We, the People, should just say no. For fiscal, humanitarian, and environmental reasons, Congress should give the VEETC and tariff the quiet burial they deserve.
The 45¢ per gallon VEETC is a “refundable” tax credit, which means it is paid for by taxpayers, with checks drawn from the general fund of the U.S. Treasury, to the tune of $5-6 billion a year. With the national debt expected to equal or exceed GDP in 2012, now is not the time to renew such extravagance.
Back in 2005 and 2007, Congress enacted and expanded a renewable fuel mandate requiring blenders to sell increasing amounts of motor fuel made from plant materials. By 2022, 36 billion gallons of the nation’s motor fuel supply must be “renewable.” The corn ethanol component of the mandate maxes out at 15 billion gallons a year in 2015. The remaining 21 billion gallons are to be “advanced” biofuels — so named not because they improve engine performance or provide additional value to consumers but because they have a smaller carbon footprint.
Congress should never have enacted this Soviet-style production quota system in the first place. But as long as the renewable fuel mandate is in place, consumers should at least be free to buy ethanol at competitive prices. The protective tariff prevents lower-priced Brazilian sugarcane ethanol from competing in U.S. fuel markets. It increases pain at the pump.
In combination with the mandate, the VEETC and tariff also divert massive quantities of grain from food to auto fuel — a factor contributing to food price inflation and the world hunger crisis of 2008. In contrast, Brazilian sugarcane ethanol poses no risk to global food security.
Al Gore’s “planetary emergency” has many able debunkers. But even if you believe global warming is a problem, the VEETC and tariff are duds (or worse) as climate policy. Brazilian sugarcane ethanol has a smaller carbon footprint, which is why EPA classifies it as an “advanced biofuel.” Yet the tariff prevents Americans from buying this “greener” commodity.
Analyses by the University of Missouri Food and Agricultural Policy Research Institute, Iowa State University (in the heart of corn country), and the Congressional Budget Office (CBO) find that the mandate chiefly determines how much ethanol is produced over the next five years. The VEETC and tariff support only a small and declining fraction of total production. Consequently, any incremental greenhouse gas reduction attributable to those policies has an unreasonably high price tag. The CBO, for example, estimates that the VEETC costs taxpayers $750 to $1700 for every ton of greenhouse gases avoided — many times the estimated price of emission permits under the Waxman-Markey cap-and-trade bill, which the Senate did not see fit to pass.
Ironically, the corn rush may actually increase net greenhouse gas emissions, as Tim Searchinger of Princeton University and Joe Fargione of the Nature Conservancy found in separate studies. A gallon of ethanol emits less carbon dioxide (CO2) than a gallon of gasoline when combusted. However, CO2-emitting fossil fuels are used to make fertilizer, operate farm equipment, power ethanol distilleries, and transport the ethanol to market. In addition, when farmers plow grasslands and clear forests to expand corn acreage, or to grow food crops displaced elsewhere by energy crop production, they release carbon previously locked up in soils and trees. For several decades, such land use changes can generate more CO2 than is avoided by substituting ethanol for gasoline.
Additionally, damage to automobile engines that are not engineered to handle the corrosive and poorly burning ethanol fuel imposes both maintenance cost and reduced efficiency losses on consumers.
Ethanol itself isn’t corrosive. The problem is that, at levels about (allegedly) 10%, adding ethanol to petrol produces a mixture that can absorb water. Car manufacturers get rightly uppity about people voiding their warranties by putting water through the fuel lines.
Engines that are designed to run on ethanol can do quite well from it. Indy cars run on ethanol now. Champ cars run on methanol. The Koenigsegg CCXR develops a lot more power when run on a mostly-ethanol mix. There’s nothing inherently WRONG with ethanol as a fuel, just as long as the engine is designed for it. Gasoline’s a perfectly good fuel too – just as long as you don’t try to run your diesel on it.
Methanol is already available … without a subsidy … at a lower price point than gasoline per BTU. Methanol can be made from any biomass as well as from natural gas. Why not just use the NG? You can except that the tank is an issue. Methanol is liquid … yes, it only has about half the BTU’s of gasoline but better to have a methanol economy and not be financing our enemies.
All you need is a flex-fuel vehicle.
I agree that the ethanol subsidies should be dropped but I’d still like to see flex-fuel vehicles.
“The statist quo” — good. It will be interesting to see if any 2012 presidential aspirants have the guts to talk sense about ethanol — especially in Iowa.
Would a congressional hearing with accountants from Archer Daniels Midland, Cargill and Monsanto be more effectively revealing of the broader picture?
McCain (remember him?) dissed ethanol subsidies and still took his party’s nomination. Few self-professed eco-philes voted for him in the November election, though.
Politicians aren’t all stupid but the smart ones are ruthlessly weeded out by the voting public. That’s where you’ll find the richest veins of pure stupid.
I wrote about biofuels last month in American Thinker. It really is a bad deal for everyone except big business and the Greens that would like to kill off large quantities of people.
http://www.americanthinker.com/2010/11/the_biofuels_scam.html
I found that whole claim very unconvincing then, and even more so now. The people who made the case for biofuels causing food price hikes tended to focus on one or two isolated cases – usually SE asia and mexico. But there was a lot more going on around the world at the time.
I suspect that biofuel production might have had an effect but it was minuscule compared with zimbabwe’s corn and wheat production tanking (once “the bread basket of africa”, now importing food), australia’s drought, failed rice crops in SE asia, middle-east states choosing that moment (god knows why) to build huge national stockpiles of grains, spiking global transportation costs (2008 – 3.96$ per gallon, remember?), observed price speculation behavior and, like it or not, rising standards of living in china (which imports rice, by the way) and eastern europe.
The just isn’t enough biofuel production to make a significant difference to global food prices. I got hold of a 2008 report from a major investment bank (no, not one of those failing american ones) that discussed food prices in depth – and biofuels barely rated a mention.
They’ll be spiking again this year. Not because of biofuel, but two very big wheat exporters might be about to have two very bad years. Russia’s wheat just burned to the ground. They were an important exporter, but russia has banned wheat exports this year. And east-coast australian grain producers are starting to worry about whether they can get what’s left of their product off the stalks with all the rain we’re having – harvesters are sitting bogged in waterlogged fields (a rare stroke of luck for S.A.) This is going to be an expensive year for beer-drinkers.
But I guess if you want to overlay “biofuel production” and “food prices” you can probably make them stretch to fit. Not because they’re causally related, but because they’re both increasing. Lots of things are increasing. Doesn’t mean one causes the other.
Matthew may be overlooking a couple of points. First, the European Union also has large biofuel subsidies. It is the total of biofuel subsidies in the world that has had such a discernible impact on world food prices. (The EU subsidies on oilseeds have had an especially big impact on edible oils like palmoil, for example). Second, the worldwide biofuel subsidies have caused a large amount of arable land to be switched from food to biofuel production, creating an underlying tightness in the food market. Of course the normal supply side shocks like weather events that Matthew mentions remain important. In fact the underlying tightness because of biofuels means that those normal shocks now result in much bigger and sustained price spikes. If you average across the normal shocks (which are both negative and positive) you see that food commodity prices over, say the last 5 years, average much higher than in the 1990s and early 2000s.
“Matthew may be overlooking a couple of points.”
It’s likely, yes.
“(The EU subsidies on oilseeds have had an especially big impact on edible oils like palmoil, for example).”
Have a couple of graphs:
http://www.rea.co.uk/prices/
http://www.pecad.fas.usda.gov/highlights/2009/03/Indonesia/
You’ll see there that palm oil prices were fairly static for most of the last decade, with a spike in 2007/2008 – after which the price dropped again, to a price that isn’t far above what it was before the spike. Everyone likes to focus on that 2007/2008 world food price spike, and doesn’t look at what went before or since. EU biofuel subsidies considerably predate the spike, and they haven’t changed since the spike. So why the spike? And why no spike now?
“Second, the worldwide biofuel subsidies have caused a large amount of arable land to be switched from food to biofuel production, creating an underlying tightness in the food market.”
I think there are bigger things at work. In the case of palm oil, that land has been cleared forest. That’s a problem, but it wasn’t land that was being used to grow something else.
“In fact the underlying tightness because of biofuels means that those normal shocks now result in much bigger and sustained price spikes.”
But you’re ignoring demand. You don’t think a quarter of the world’s population seeing a 10% increase in their standard of living would have an impact? And I’m getting the sense that you’re treating the world’s food supply as somehow fixed. It isn’t.
“If you average across the normal shocks (which are both negative and positive) you see that food commodity prices over, say the last 5 years, average much higher than in the 1990s and early 2000s.”
If you average ANYTHING over the last 5 years, it’ll be more expensive than it was in the 1990s. It’s called inflation. Look at the impact of china and india on the world prices for minerals and energy – it’s been truly staggering. Why shouldn’t that apply to food?
You cannot have 40% of America’s largest crop being used in a new venue without having an impact on price. (BTW, my family’s finances have been greatly helped by the ethanol, but I want to be honest about the impact.)
Probably true (although I haven’t checked the 40% claim).
But if the US just ditched the trade barriers, you wouldn’t BE converting corn to fuel. It’s the not fact that biofuel is being produced that’s the problem – it’s the flamin’ skewed marketplace. It’s an agricultural subsidy, not an energy strategy.
Our stupid politicians, both Republican and Democrat, initially with pressure from the green and farm lobbies, allowed this to happen. But, don’t be surprised if they renew VeetC for another 5 years. Why is it that the politicians and greens think that if you throw enough money at a new technology and give it enough time, then our technological inventiveness will automatically reduce the manufacturing cost down to nothing? Thirty years later there have been no breakthroughs in ethanol manufacture to drive down costs to competitive levels. This is the same thinking that continues government subsidies for windmill, solar cell and fuel cell power. GE is involved in all of these alternative energy technologies at a cost to taxpayers of $300 million per year in subsidies to support about 1000 jobs. If cap and trade legislation is ever approved, GE will receive total subsidies of $600 million. Go figure.
And just what was wrong with the Stanley Steamer?
It was pretty fast, for its day. Jay Leno still drives his.
In an accident, it was almost certain that somewhere along the hundreds of feet of steam cooling lines (part of the necessary water recapture system) there would be a rupture. And you’d bake like a lobster in the release of steam.
That was kind of a problem.
Yeah, but people were just a lot tougher/more disposable back then.
I was reading recently about the auto-union/mercedes speed runs on the autobahn in ’38 (268 MPH … in 1938, on narrow cross-ply tyres. Stick that in your veyron and smoke it!) and the death of one of the two drivers (Bernd Rosemeyer) on the day. One article was laying out the approach to safety at the time – for example, drivers didn’t wear seat belts, because it was considered safer to be thrown clear from the car.
Car Stuff did a podcast about it recently. If you haven’t checked it out, do yourself a favor (hat tip to molly). Also check out Stuff You Should Know – it’ll make your day better.
Corn fuel ethanol stinks
Audit the fed, support HR1207Paul
* * Alex Farrell, Gray Davis & Gary Condit interest in fuel oxygenates seemed interesting
* * California CalEPA Secretary Linda Adams, signed a MOU with the UN in China on earth day. China gets about 50% of the world carbon tax and the China government gets a 50% tax of the credits.
** China goods and services may increase
** We pay the (ethanol or) carbon tax and Pew Business Environmental Leadership Council (BELC) Member Companies: ABB, Air Products, Alcoa Inc., American Electric Power, Bank of America, BASF, Baxter International Inc., The Boeing Company, BP, California Portland Cement, CH2M HILL, Citi, Cummins Inc., Deere & Company, Deutsche Telekom, The Dow Chemical Company, DTE Energy, Duke Energy, DuPont, Entergy, Exelon, GE, Hewlett-Packard Company, Holcim (US) Inc., IBM, Intel, Interface Inc., Johnson Controls, Inc., Lockheed Martin, Marsh, Inc., Novartis, Ontario Power Generation, PG&E Corporation, PNM Resources, Rio Tinto, Rohm and Haas, Royal Dutch/Shell, SC Johnson, Toyota, TransAlta, United Technologies, Weyerhaeuser, Whirlpool Corporation, Wisconsin Energy Corporation and friends may all share in the public/private partnership of corporate and NGO welfare
Get food out of my gas
* * Valero is #1 corn fuel ethanol producer in the US
* * Was Dr. Russell Long/REAP/Pavley 2002 CA tailpipe bill for corn fuel ethanol, Bill Jones’ Pacific Ethanol business?
* * Clean Air Performance Professionals (CAPP) supports a Smog Check inspection & repair secret shopper audit, gasoline ethanol fuel cap and elimination of dual fuel CAFÉ credit to cut car impact over 50% in 1 year.
* * Some folks believe ethanol in gasoline increases oil use and oil profit
* * Ethanol uses lots of water
* * A Smog Check audit would cut toxic car impact in ½ in 1 year. Chief Sherry Mehl, CA/DCA/BAR, has never found out if what is broken on a Smog Check failed car gets fixed.
* * An ethanol waiver would stop billions in California Big oil refinery welfare program
* * About 60,000 barrels per day of the oil used by cars is allowed by the “renewable fuel” CAFE credit
An acre of hemp will produce 4 times the ethanol as an acre of corn, Henry Ford believed it was a better fuel for cars than gasoline, it burns clean, will grow in all fifty states, no arabs need to be involved.
I reckon sugar cane would beat them both.
True, but sugar cane can’t be grown in the US outside of Hawaii and south Florida. And Big Sugar has wrought ecological catastrophe on the latter.
Then there’s the massive federal sugar subsidies and tariffs which make domestic sugar about 3X more expensive than anywhere else. You thought the ethanol subsidies were bad . . .
Sugar cane is a major source of ethanol in Brazil because it’s a tropical country and it grows easily there.
Yep Bill your right, but our big one party government cannot seem to do the right thing for it’s people. Why can China, Canada, Britain, Germany and many more countries grow hemp but our farmers can’t? Read the history on hemp, it will make you think.
There’s plenty of hemp grown in the Nat’l Forest areas of the Northwest and the Southeast.
LOTS of it.
“None of the alternatives to petroleum derivatives perform as well in terms of cost, portability, and energy density.”
There is a corollary to this that is also very important. Gasoline did not become popular because it was cheap. It became cheap because it was popular. If rechargable batteries or hydrogen fuel cells or cow dung could store more BTUs than gas for same the volume and weight, then those fuels would become more popular and eventually cheaper.
Once preferments (like “temporary” taxes) are established they seem to have eternal lives. The success of the sugar lobby attests to that. Let us hope.
Ethanol efficiency is a hoax, in fact if you feed an engine 10% ethanol instead of regular gasoline, it will average 10% less fuel efficiency. Physics is a hard taskmaster.
it also hinders me from making cornbread or corn fritters or corn dogs or…
I’m sorry, but are you saying there’s ZERO energy content in the ethanol?
That’s the only way that calculation makes sense.
Ethanol fuel has been around since the late 1900′s. It never came into wide use. Why? It was not efficient then and it is not now.
Ethanol was always a clayton’s solution. It only paid off financially for consumers if it’s subsidized (either by paying ethanol producers, or not taking the ethanol component at the pump). It’s not what our cars were designed to run on, either. If we want cars that run on ethanol, let’s make cars that run on ethanol – let’s not make cars that run on gasoline then run them on ethanol.
From an emissions point of view, it’s a loser. It’s popular politically because nobody has to do anything, but the technology is available, it’s easy to integrate with existing supplies and it LOOKS like it’s doing something. But the real action on biofuels is happening elsewhere.
As for sugar generally, I read somewhere once (or was it heard?) that the global price for sugar was about half the global average production cost. As a result, sugar doesn’t pay for farmers anywhere without some sort of subsidy. So be prepared – if prop-ups for US sugar beet growers are removed, the whole industry will probably fold. You’ll be getting your sugar from canes grown in brazil instead (although we australians will be happy to sell you some of ours if you want it).
I think it’s a good idea. It’ll give you a bit more leverage next time you’re negotiating with the EU about reducing your trade barriers.
Internal combustion engine can be made to run efficiently on any gaseous hydrocarbon with properly engineered fuel /air mixture and spark advance curve. The high octane / anti knock fraud is one of the biggest ever spun for public consumption. Ask any oilfield neighbor about condensate “drip gas” harvested from producing “friendly” wells. It’s hard to ignore any hopeful solution while such sorry efficiency of gasoline burning engines is still acceptable after 100 yrs of production.
Question about heat recovery normally lost from gasoline burners running at 30% efficiency and polluting your air with both the lost heat, unburned fuel and additives used to replace lead once turned loose to forever poison the soil from which your veggies must feed. It seems that all the electrics from GM and Nissan will be powered by our grid that relies on 50% coal burning power plants for electric energy production. There’s already resistance looming for Boone Pickens’ wind farms in Texas and Oklahoma through necessary connection to the grid controlled by guess who.
Fuel / air / water emulsification heat recovery systems using stock available parts to produce one horsepower per CID were demonstrated during the seventies energy crisis using three stage heat recovery / fuel evaporation engine cooling / exhaust driven emulsifier (turbo charger) while meeting all govt. imposed emission standards without any added extra devices. What ever happened to the retired race car mechanic in Florida back then that drove a Ford powered by a small diesel tractor engine to Washing at 40, 60,and then 80 MPG ?
Is the smell of energy price control conspiracy beginning to rise from your ash pile yet? If not, then get ready for the forced pharmaceutical consumption from any FDA approved health care plan to simply hide the symptoms of your deteriorating hulk caused by the consumed pollutants. Just compare the parallel sales rise of FDA approved chemical pollutants to the rise of any human malady you choose. It works for the rest of the world. A statistician in India made the connection between obesity rise in schools to a matching rise in corn sugar loaded canned sodas using data compiled over here.
Don’t build your confidence on government oversight of any business effected by energy in any way. It’s gonna be tough as long as new ideas that drastically effect the bottom line of any industry giant can’t get past legislated protection and threats from boards of lawyers on retainer existence. They’re not that smart, just aware of the rules drawn up to provide for their own success. Never rule out bicycles, garden tools or DIY technology. Web info is yet unlimited.
Internal combustion engine can be made to run efficiently on any gaseous hydrocarbon with properly engineered fuel /air mixture and spark advance curve. The high octane / anti knock fraud is one of the biggest ever spun for public consumption. Ask any oilfield neighbor about condensate “drip gas” harvested from producing “friendly” wells. It’s hard to ignore any hopeful solution while such sorry efficiency of gasoline burning engines is still acceptable after 100 yrs of production.
Question about heat recovery normally lost from gasoline burners running at 30% efficiency and polluting your air with both the lost heat, unburned fuel and additives used to replace lead once turned loose to forever poison the soil from which your veggies must feed. It seems that all the electrics from GM and Nissan will be powered by our grid that relies on 50% coal burning power plants for electric energy production. There’s already resistance looming for Boone Pickens’ wind farms in Texas and Oklahoma through necessary connection to the grid controlled by guess who.
Fuel / air / water emulsification heat recovery systems using stock available parts to produce one horsepower per CID were demonstrated during the seventies energy crisis using three stage heat recovery / fuel evaporation engine cooling / exhaust driven emulsifier (turbo charger) while meeting all govt. imposed emission standards without any added extra devices. What ever happened to the retired race car mechanic in Florida back then that drove a Ford powered by a small diesel tractor engine to Washing at 40, 60,and then 80 MPG ?
Is the smell of energy price control conspiracy beginning to rise from your ash pile yet? If not, then get ready for the forced pharmaceutical consumption from any FDA approved health care plan to simply hide the symptoms of your deteriorating hulk caused by the consumed pollutants. Just compare the parallel sales rise of FDA approved chemical pollutants to the rise of any human malady you choose. It works for the rest of the world. A statistician in India made the connection between obesity rise in schools to a matching rise in corn sugar loaded canned sodas using data compilled over here.
Don’t build your confidence on government oversight of any business effected by energy in any way. It’s gonna be tough as long as new ideas that drastically effect the bottom line of any industry giant can’t get past legislated protection and threats from boards of lawyers on retainer existence. They’re not that smart, just aware of the rules drawn up to provide for their own success. Never rule out bicycles, garden tools or DIY technology. Web info is yet unlimited.
It is past time for ethanol subsidies. I know many farmers who plowed their perennial grass hay fields and planted corn in them. They made a lot of money doing that. The price of hay in some parts of the country doubled.
That made grass-fed cattle, sheep, goats, etc. more expensive.
Many more times the fuel required to harvest hay is required to plant and harvest corn.
Grass hays are self-renewing. It takes some time to establish hay fields, and this ethanol bs has removed thousands and thousands of acres from the production of hay to the production of corn.
You don’t hear much about that in the news. It’s just a small bit of the big picture of the whole mess – but it is responsible for an increase in food prices. If you aren’t a farmer, you likely would not see or understand the impact.
funny how so many fail to look at something so basic as ability to easily start. present mix here in maine is 15 ethanol and at -28 F the starting is noticeably harder.
then add in the water absorption issue and it gets really friggin funny.
people love to toss out how indy cars run on it, funny they never mention they run 45psi boost pressures too.
aluminum does not do well with meth/eth no matter what the absorbed water content is. this is why many aircraft manufacturers address it in their Corrosion Prevention Manuals.
wish as much funds had been allocated to biodiesel as ethaNOT.
I have a web site where I research stocks under five dollars. I have many years of experience with these type of stocks. I would like to comment about the idea of burning corn which is food to produce energy this is the worse and most immoral thing that I can think of making fuel from food this makes the united states look immoral to all the poorest countries all over the world with prices for corn wheat and rice rising in price is it not time to end this insane policy.
Clean Air Performance Professionals
21860 Main Street Ste A
Hayward, California 94541
Monday, April 23, 2012
California senior Senator
Honorable Dianne Feinstein
San Francisco office
One Post Street
San Francisco. CA 94104
(415) 393-0707 / (202) 228-3954
RE: NO on SB 1396 Dutton & AB 523 Valadao unless amended.
Good morning Senator Feinstein,
Federal ethanol policy increases Government motors oil use and Big oil profit.
It is reported that today California is using Brazil sugar cane ethanol at $0.16 per gal increase over using GMO corn fuel ethanol. In this game the cars and trucks get to pay and Big oil profits are the result that may be ready for change.
We do NOT support AB 523 or SB 1396 unless the ethanol mandate is changed to voluntary ethanol in our gas.
Folks that pay more at the pump for less from Cars, trucks, food, water & air need better, it is time.
The car tax of AB 118 Nunez is just a simple Big oil welfare program, AAA questioned the policy and some folks still agree.
AB 523 & SB 1326 are just a short put (waiver) from better results.
Thank you for your life time of service.
Clean Air Performance Professionals (CAPP) / An award winning coalition.
Charlie Peters
Cc: interested parties
CAPP contact: Charlie Peters (510) 537-1796 cappcharlie@earthlink.net